Rising net SIP flow in MFs points to returns for retail investors

Not only foreign portfolio investors are flocking to the Indian equity market, but also retail investors in mutual funds through systematic investment plans.

Net inflows through systematic investment plan increased five percent to Rs 8,600 crore in June from Rs 8,155 crore in May. This is despite gross inflows falling to ₹12,276 crore in June against ₹12,286 crore recorded in May, according to data obtained by the Association of Mutual Funds of India.

SIP net inflow is the difference between the gross inflow and outflow of SIP accounts.

Net inflows accounted for 70 percent of gross inflows in June, indicating that SIP suspensions and redemptions are slowing down.

Interestingly, net inflows declined by 6% in April to ₹6,705 crore from ₹7,128 crore reported in March. However, the tide has started to turn and net inflows jumped 28 percent in June compared to April, though gross inflows rose just 3 percent from April’s level of Rs 11,863 crore from June’s Rs 12,276 crore.

The market is recovering

Active SIP accounts increased 3 percent in June to 5.55 crore against 5.39 crore recorded in April. The industry added 59.50 lakh new SIP accounts in the June quarter, while 32.34 lakh were closed.

The returns for retail mutual fund investors coincided with the equity market rebounding from the trough with increasing inflows from FPIs. After being net sellers to the tune of ₹51,422 crore in June, FPIs turned into net buyers in nine months, investing ₹1,971 crore in July as falling commodity costs and a fall in crude oil boosted the economic outlook for institutional investors for India.

The upward trend in FPI investments continued in August as inflows into equities reached ₹14,175 crore in the first week of this month.

VK Vijayakumar, Chief Investment Strategist, Geojit Financial Services, said there is a complete reversal of FPI activity in the Indian stock market and this change in their strategy has fueled the recent market rally. The decline in the dollar index from a high above 109 last month to below 106 now is the main reason for the FPI inflow, he said.

Published on

06 August 2022

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